Servias Ministries Blog

Recently, various and sundry commentators have claimed that gold is in a bubble.  Every bull market does its best to remove as many participants as possible on its way to “exuberant investing”.  However, this is not yet the case for gold or gold equities.  Junior gold stocks are still relatively unknown to the investing public.  Central governments in the Far East are woefully deficient in gold reserves relative to times of historical highs in gold.  Institutional investors have little or no exposure to gold or its related stocks.  The following chart located on U.S. Gold’s website provides a perspective of the bubble potential of gold:

Gold remains a currency barometer for all the fiat money around the world.  The U.S.Dollar, a fiat currency, is based solely on the perception of strength of the United States.  This perception of strength has been sustained for decades but we must be careful to be too short-sided in our view.  Our manufacturing based economy has been replaced by a services based economy.  Manufacturing jobs left the U.S. in favor of cheaper blue collar labor.  The same is now happening with research & development (R&D).  The erosion of the U.S. infrastructure will surely come back to haunt us.

In 2010, it is expected that state governments will incur a $125 Billion deficit.  In Oklahoma, state workers have already been given notice of staffing cuts of 10%.  Tax revenues declined by 28.5% versus last year.  40 other states are in worse shape.  County and Local governments are seeing declines in tax revenues which will translate into further unemployment.  The Federal Government is attempting to slow the decline with stimulus dollars but with only some positive effect.

The U.S. consumer is holding the answer to the near future.  I find more and more people are jumping on to “simplification” message.  Who needs fifty tee shirts in their armoire?  The personal surplus of “stuff” is starting to leave the household.  Unneeded clothing, furniture, and “boy’s toys” are leaving the garage.  This will all translate to lower retail sales.  The “stuff” is now deemed to have no lasting fulfillment and people will start waking up to that fact soon.  The days of the sloppy look will soon leave as well.  The ultra casual look of pajamas and low crotch jeans will be replaced by a more formal look as people compete for jobs which are becoming scarce.

Painful times are ahead for the global economy.  There is no indication that the Fed will be able to slow the quantitative easing (printing excess money) even though they give lip service to it.  In recent days they further opened the checkbook to beleaguered mortgage giants Fannie Mae and Freddie Mac.  The FDIC has required 3 years’ premiums in advance from banks and it still virtually broke.  Banks sold securitized investments to clients such as Pension Funds then bet against the performance of those investments.  You cannot have all these complex problems and think that there will be no suffering.  The day of reckoning will occur, the only question is “when”.

Each one of us is as unique as a snowflake.  We hope your Holiday Season is blessed and your New Year is prosperous.

Source: http://www.its.caltech.edu/~atomic/snowcrystals/

Proliferation of lies is at epic proportions.  How can one invest properly when the truth is so difficult to obtain?  Do men think that Our Heavenly Father is just going to sit around and let this deluge of lies continue unabated? 

Standard & Poor’s bond rating agency recently issued the following statement:

“The downgrade reflects our opinion that the measures to reduce the high fiscal deficit are unlikely, on their own, to lead to a sustainable reduction in the public debt burden. If political considerations and social pressures hamper progress, we could lower the ratings further,” it said.

Which country was the focus of this downgrade in quality?  If you live in the U.S. you would be convinced that S&P just reduced the U.S. Treasury Bond’s credit rating.  S&P could use that precise language to describe the current direction of the economy and the levels of debt and deficits that will take decades to resolve.  However, this new rating is directed towards Greece.  See: http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6827320/SandP-downgrades-Greece-while-concerns-mount-over-secret-defence-budget.html

The ninth Commandment is the basis of all court procedure.  Any dispute must be resolved by the truth.  U.S. Courts have been infiltrated with the view that the truth is secondary to the “facts” of the case and has opened the door to misrepresentations of the facts to be held as “truth”.  Sly and intelligent lawyers, witnesses, prosecutors, and law enforcement personnel have managed to impart their version of the “truth” to further their specific agendas.  Corporate marketing executives have “bent” the truth about their products and their ability to deliver as advertised.  Government leaders find it necessary to lie to the citizens of their countries for the “greater good”.

Truth is the basis of society.  It is like a glue that holds relationships together.  Can any relationship sustain the habitual lies of at least one of the parties?  Integrity is consistency of actions, values, methods, measures, principles, expectations and outcome.  Only when a person bases his walk on truth will he be known for his integrity.  As we pursue truth, our integrity quotient will increase but if we are caught in a lie, our integrity moves quickly to zero.  As governments are caught in lies, the citizens begin to reciprocate with their own lies.  If you study the demise of the Soviet Union, you will find that lies ripped the fabric of that society and was the basis of their fall.

The U.S. tax base is falling.  In 2010, it is estimated that the state, county, and local governments will experience a $2 Trillion deficit.  State governments have already begun to cut services and personnel.  Things are going to get worse around the country.  This is no longer a time for denial but it is the time for all of us to set aside our own agendas, seek Our Heavenly Father, and to turn from our wicked ways.  The truth is going to prevail.  The only question is how much pain and suffering will occur to restore this glue that holds society together?  This country and the globe are going to experience judgment associated with lawlessness.  It is only a matter of time.  The Ten Commandments were given to protect and promote a peaceful society.  Once again, men think that they know more than Our Creator and can establish themselves as “gods” by superseding the most fundamental of realities- truth.  Their fruit will be judged soon.

One of the greatest business principles to come out of Scripture is to follow Life and the Living.  By contrast, following death and the dying insures failure.  You can pick any industry and view its history to find evidence of this reality.  The medical profession is a great example.  On one hand, surgeons have found that less invasive techniques of surgery promote quicker recovery time.  On the other hand, administering more drugs increase the probability of complications (aka, contradictions) thus exposing the patient to unintended consequences.  The Environmental Protection Agency is mandated to protect the population against mercury poison whereas the Dental industry has a history of putting mercury amalgams in teeth.  Dentists who continue to put metal amalgams in teeth will slowly lose clients as the population understands the negative impact of this practice.  Dentists who embrace this understanding of life-promoting protocols will flourish in their business.  The rest will wonder what happened.

John 10:10  The thief cometh not, but for to steal, and to kill, and to destroy: I am come that they might have life, and that they might have [it] more abundantly.

Hearing Our Heavenly Father (by way of Jesus Christ) is a prerequisite to following Life and the Living.  In the Gospels, Jesus gave us critical business principles to live by.  Purse life, not death.  Embrace change and you will not only survive, but you will thrive.  Overcome your emotional attachment to things, ideas, and past success so that you can embrace the dynamics of life.  Become a fruit inspector and analyze any endeavor to determine if it is producing good fruit or is capable of producing good fruit.  If it isn’t, let it go.  Ask Our Heavenly Father to open your eyes and ears so that you can see and hear what is around you so that you can embrace and pursue life.

There is nothing wrong with abundance, Jesus promoted it.  There is something wrong with having abundance in order to consume it on “me and my four, and no more”.  We are all part of the body of Christ and are to supply each other.  When one has a need and another sees it AND can fulfill it, failure to do so is an indictment against the body and puts both parties in bondage.  When left unchecked, this bondage will produce death.  Lack is all around us but we tend to filter out the needs of others so that we can “get ahead”.  By hearing Our Heavenly Father in the area of giving, we open ourselves up to the abundance that Jesus spoke of in the above passage.  Quit being self-centered in your prayer time and ask Our Heavenly Father who you can bless today.  Who can you save from death and destruction?  Our Heavenly Father is the giver of life and HE is aware of all the needs as well as the location of all the abundance to meet those needs.  As you shift your focus from the mirror to those in need, you place yourself in a position to receive revelation that will put you on the path of Life and the Living.

If you are fearful of taking an action in a new direction, you may not be hearing Our Heavenly Father.  “Faith cometh by hearing” Our Heavenly Father.  HE provides the peace and assurance of being on the right path.  If you have an idol in your heart, it will impede success.  Only be spending time in prayer can these idols be exposed.  As King David realized that his actions produced death, his plea became: “Create in me a clean heart, O God; and renew a right spirit within me.”  If your business is currently unfruitful, stop, listen, repent, forgive and be forgiven, respond with change.  When you align yourself with the Author of Life, success will find you!

January 11th, 2011 has been of great interest to me. Circa 1997, Our Heavenly Father brought this into focus.  I was working “heads down” on a programming project on a Friday afternoon and suddenly the “anointing” came.  HE immediately told me to turn around and look at the clock and it was precisely 1:11:11.  HE said, “I bring MY anointing at the precise time”.  The anointing comes based on need.  At that time, I began to keep an eye out for any event tied to this number.

Economic cycles occur in multiple forms: short-term, long-term, monetary based, job based, etc.  What would happen if that “Perfect Storm” of cycles all converged at a specific point, similar to “Black Monday” in 1987, but with a greater magnitude at the convergence point (or date)?  It appears that early 2011 may be one of those such points.  See: http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6763411/Baroness-Vadera-I-still-have-nightmares-about-the-financial-crisis.html

There are two facets of financial wealth: maximizing Return on Investment (ROI) and Preservation of Wealth (PW).  In Biblical terms, we are to focus on life (PW) and the living (ROI).  Dying equates to losing money and death equates to a complete loss.  We must keep our focus on life and the living and discern the difference between life and death in every facet of our walk.  As an example. for decades we all assumed that our home would appreciate in value thus we leveraged ourselves to buy the most house our income would support.  We expected appreciation of value and were comfortable in maximizing our leverage.  As the Fed lowered interest rates which effectively lowered the monthly house payment, they facilitated more expensive home sales.  They tempted borrowers to maximize their leverage beyond their ability to ever repay the principal amount of the loan.  They sacrificed the “Preservation of Wealth” aspect for the expected “Return on Investment”.  You must keep these two facets in balance or you will shift towards death and dying.

The same is true for revelation.  Wealth represents life and ROI represents growth or the living.  Churches die when the revelation that built their congregation becomes tradition.  They failed to invest their time pursuing greater revelation and became complacent and began the death march.  How can you tell what path a group of people are on?  Become a fruit inspector and look at the fruit.

“Seek ye first the Kingdom of GOD and His righteousness” is a well known Scripture among Christians.  Judah was given the scepter representing the King and Joseph was given the birthright or inheritance.  Joseph’s sons were given prophetic names representing this reality: Manasseh and Ephraim.  Manasseh = "causing to forget"; Ephraim = "double ash-heap: I shall be doubly fruitful".  Why must we seek the Kingdom?  It is because we have forgotten the fruitfulness of the Kingdom.  We accepted our assignment before we entered into the womb (that’s a whole other topic in itself).  But now we are to seek this Kingdom of fruitfulness.  If we do, there is no need to be concerned about tomorrow for the daily fruit will sustain us just as the manna did in the wilderness.  Once we leave this wilderness, there will be no more need for the manna.

The manna was given to test their hearts for lawfulness (Exodus 16:4).  The manna was given as a daily provision and could not be hoarded.  They were to focus on “today” rather than the future.  Each day there were tested for lawfulness and their stewardship.  They needed to learn that to be good stewards, they must focus on what they were given for that day rather than always living and focusing on the future.  Men are always wanting to work a deal with Our Heavenly Father.  “God, if you will financially prosper me, I will fund the Gospel.”  In the meantime, needs all around them go unmet.  If you want to fund the Gospel then be a good steward over what you have been given.  Complete the project in front of you and show your Heavenly Father that you can be trusted with a small project so that HE can send you a larger project.  Men tend to run to and fro looking for that one deal which will make them rich, bypassing those small projects that will lead them to the road of success.  Be fruitful in what you have been given and trust Our Heavenly Father to expand your “tent”.

Excessive leverage is an attempt to bypass stewardship and catapult you to a higher net worth.  Greed kicks in and ultimately brings you back to a financial position worse than before you started.  Be of good cheer, Our Heavenly Father does not want to punish you but to prove and test you by revealing what is in your heart.  Once you see your error, you can then begin to build wealth on a solid foundation and become the blessing to others you were meant to be.

Have you been given a small project and failed to deliver?  If so, repent and complete it… even if it means you won’t make a profit.  By doing this, you establish a basis by which Our Heavenly Father can trust you with a larger project.  Anybody can start a project but only good stewards finish it.  This is the best return on investment and wisest means to preserve your “capital”.

Several months ago, I projected gold to hit $1,600 by January 11th, 2011.  We have 13 months to go and the commercial real estate market is now unwinding with the Dubai World news bringing this issue to the forefront.  Any discussions of raising interest rates is purely intended to manipulate perception.

The U.S. Total Debt is racing towards a cliff with nothing to stop it.  The Administration has projected this year’s deficit to be $1.417 Trillion.  However, simple mathematics would indicate that the deficit will be $1.885 Trillion based on the government’s own numbers.  In 1982, The National Debt was $1 Trillion.  By 2019, the National Debt will be $25 Trillion and the interest payments alone will be $1.5 Trillion per year.  This is bullish for gold, silver, oil, and natural gas denominated in U.S. Dollars.

Am I a gold bug?  Of course not, I am a pragmatic student of economics.  I don’t think there are any true experts in economics based on the track records of all their proposed economic theory.  Economics is affected by the spiritual realm and cannot be sanitized from its impact.  This higher realm affects men’s decisions, emotions, greed, and fear.  This is why mathematicians have been unable to find the “holy grail’” of formulas to predict future prices of stocks and commodities.  You must look at Biblical fundamentals and cycles to see where the economy is headed.  The real issue becomes the timing of the changes in direction.  In 1990, I discerned that the U.S. was headed for destruction but knew not the timing.  It took a decade for the first bubble to burst.  In the meantime, it appeared that I was wrong since I had no understanding of the timing factor.  Now the bubbles are bursting at a faster rate and leaders are using out-of-date tools to fix the problem.  There are such massive levels of leverage on assets out there, the only liquid asset without a liability attached is a precious metal.

Currently it takes about 8.75 ounces of gold to equal the Dow Jones Industrial Average (10,471/1200).  Once this ratio moves to a 5 to 1 relationship, one should consider reducing their gold or silver position slightly (assuming you have a 10-20% position relative to your assets now).  If the relationship moves to a 1 to 1 ratio, diversification into other assets should be considered.  This ratio has only been achieved a couple of times in the last 150+ years.  This would indicate that the public in now “all in” and the public is usually the last group to arrive on the investment scene.

The financial media has been talking up the Dubai default.  It would appear that there is some attempt to manipulate the fear among investors in an effort to increase the demand for the US Dollar and slow its slide.  Foreign Government and Institutional investing in gold will keep a lid on any notable appreciation of Dollars.  China recently announced its intention to be a buyer of gold, up to 10,000 tons, for the next ten years.  What currency do you think they will use to buy their gold?   See: http://www.washingtonpost.com/wp-dyn/content/article/2009/11/30/AR2009113001461.html

Our world leaders are “satisfied” that everything is under control.  Just a note on Gordon Brown: Between 1999 and 2002 Brown sold 60% of the UK’s gold reserves at $275 an ounce. A frequent criticism of this decision was that an unprecedented rise in the gold price since has resulted in £2 billion of lost potential revenue (at 2007 gold prices). As a result, the period from 1999 to 2002, when gold prices were the lowest for 20 years, has been dubbed the "Brown Bottom".  Based on today’s price, the bottom even looks deeper and what is that brown stuff on the bottom?

Exploitation of the poor and desperate is the focus of a recent PBS documentary.  I suspect that the only way they can get away with these documentaries is the fact that the number of viewers is low.  I have personally seen the result of banking’s “credit card trap”.  It ruins peoples’ lives, it breaks up marriages, and it damages the innocence of young children who are victims of these households.  Do the banks care if they are the instruments of destruction?  Apparently not.  This is just another aspect of the coming Divine judgment of America.

I was in banking in the 1970’s and learned every aspect of banking as a result of conducting “systems and standards” studies.  I would go into a department and work each job, observe each job, technology, and flow to determine what improvements were necessary to increase efficiency and effectiveness.  I was on the team that installed the first debit card machine in Oklahoma around 1976.  It was a Model NCR 770.  During our testing, I was able to “hack” the code and empty the contents.  As a good employee, I notified NCR and the programmers changed the software to close the backdoor.  Once I saw how the process worked, I knew that I would never use a debit card.  It would require substantial discipline and bookkeeping skills to keep your bank account in balance.  Additionally, it exposes your cash to outsiders who would attempt to extract it by unsavory methods.  Hence, to this very day I write checks, use credit cards, or pay with cash.  If you cannot pay off your credit card, don’t use it for daily purchases.  I use the bank’s money for up to 30 days, as a convenience.  The system is making it more difficult for you to write a check.  Why?  It is inconvenient to them to process the paper versus processing an electronic signal.  Online banking is not safe either.  You are only as good as the weakest link in the electronic flow of your information.  The best hackers will install a “keyboard ghosting” program on your PC and simply log the sites and your user-id and password.  Then at some point, have it sent to an address, encrypted of course.  I am somewhat surprised that this method has not become commonplace.  Do you think the smart hackers are the ones who attempt to erase your disk drive?  No, those are the immature but bright hackers who want their ego stroked.  The banks are still required to “verify” your signature on a check before accepting it.  However do to the volume, that verification rarely occurs.  It is still your safeguard against someone else having unauthorized access to your money.  In the 1970’s, bankers were hoping to be “paperless” in 20 years thereby eliminating this “inconvenience”.

If banks are concerned about making money, why have they increased the number of branches so that we are never more than 1 mile from a branch of some bank?  Greed!  Their exorbitant fees have allowed them to grow their geography resulting in greater market share and fatter bottom lines .  When I was growing up in a suburb of about 40,000 people, we had about five banks in the suburb.  It seemed to work out well then.

Check cashing companies and pawn shops are designed to exploit the desperate.  Lawmakers look the other way when the conversation focuses on the sky high effective rates that lenders charge.  It amazes me that the interviewees could keep a straight face when they talk about the prevailing attitude of banks to find loopholes in regulations that would allow them to charge unlimited interest rates.  The Congressmen in the interview would lead us to believe that the banking industry is the one in charge, I suspect they are right.

Isa 10:1

“WOE to those who decree unrighteous decrees,

Who write misfortune,

Which they have prescribed

Isa 10:2

To rob the needy of justice,

And to take what is right from the poor of My people,

That widows may be their prey,

And that they may rob the fatherless.

Isa 10:3

What will you do in the day of punishment,

And in the desolation which will come from afar?

To whom will you flee for help?

And where will you leave your glory?

See: http://www.pbs.org/wgbh/pages/frontline/creditcards/view/

Peter Lynch was one of the greatest investors and managed the Fidelity Magellan fund.  He would comment about his shopping trips with his wife and how those trips impacted his stock positions.  We went to BestBuy last night to look at a new computer monitor.  My wife went to look at the Wii games as I was analyzing features and benefits of each monitor.  We both were encountered by sales associates.  Last year you couldn’t even get one to make eye contact with you let alone assist you.  This year, they were seeking us out like sharks in a feeding frenzy.  Once they found out what we were interested in, they immediately took 10% off of any purchase we made.  The sales associate commented to my wife, “We just need to sell something”.  In Oklahoma, our unemployment rate is below the national average and have not had the same economic impact as the eastern and western states of the country.  If sales are down at our locations, one can only imagine what they are in those states such as Michigan, Florida, New York, and California.

“Black Friday” is just a few days away.  I wonder how the powers that be will massage the expected severe drop in sales?  You can be sure that come January, store closings are going to ramp up and inflict further damage to the commercial real estate market whose bubble is expected to pop in 2010.  Any recovery suggested by the media will only be short lived.

Any further economic stimulus will not address the huge debt problem, only add to it.  Be prepared for the double dip.  Many precious metal newsletter writers are calling for a “top” in the price of gold.  I disagree.  It may dip due to volatility, but it has a long way to go before it goes to a “mania” level of $5000-6000.  Expect daily swings in the $100 class.  Those who trade the precious metal will be whipped around like a kid on a merry-go-round.  Our historic assumptions that those in power are in control will evaporate just as Dorothy and her friends realized who was behind the curtain in the Wizard of Oz.

More portfolio managers are now getting on the gold wagon: http://seekingalpha.com/article/174334-paulson-gold-s-bull-run-is-just-beginning?source=feed 

In the cycle of investing, smart money gets in first, institutional money goes in second, and last of all, John Q. Public hops in.  Until the shoeshine boy gives you a tip to buy gold, it would appear that gold will continue its march upward.  Silver will follow.